Penalties for Filing a Late Tax Return
If you are due a refund, there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. Here are some facts that you should know about penalties for filing a late return:
Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.
Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.
Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.
Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.
Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.
File even if you can’t pay. Filing on time and paying as much as you can keeps your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.
What Happens If You Don’t File a Past Due Return or Contact the IRS?
It’s important to understand the ramifications of not filing a past due return and the steps that the IRS will take. Eventually, the IRS will prepare a return on your behalf, and that return is likely to be disadvantageous to you. For example, the Service will not make any elections for you such as itemizing your deductions that might lower your tax. If you are married, the IRS will calculate your tax based on the highest married-filing-separately rates. The Service will use this return to record an assessment of tax against you and then add penalties and interest. This will enable the IRS to begin collection actions that might include a levy against your bank account or a garnishment of your wages.
If you haven’t filed a tax return yet, call our office today to schedule an appointment as soon as possible.